![]() There is no liquid market for Czech power derivatives and there is no way you can hedge that position with a perfect hedge. ![]() You are a trader and have an open position against a less liquid product (eg 10 MW power delivery in Czech Republic several months from now – let’s assume Sep 2015). What matters is to allow traders and risk managers to report exposure against the right products (and what is “right” is a whole other different topic). For the sake of an ETRM implementation the exact differentiation does not matter that much (as long as everyone agrees hedging is about removing risk from portfolios). ![]() When I started out as an ETRM consultant it took me a while to get the difference between trading and hedging – or at least get a feeling that I understand.
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